RIPR is a (paper) newsletter and a weekly column appearing in ten
of Rhode Island's finer newspapers. The goal is to look at local,
state and federal policy issues
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About

The Rhode Island Policy Reporter is an independent news source that
specializes in the technical issues of public policy that matter so
much to all our lives, but that also tend not to be reported very
well or even at all. The publication is owned and operated by Tom
Sgouros, who has written all the text you'll find on this site,
except for the articles with actual bylines.

Responsibility:

Tom Sgouros

Mon, 31 Jan 2005

The Hubble space telescope, already the source of more scientific
discoveries than almost any other space program ever, is doomed, in
need of repairs and without an active shuttle fleet to service it.
There's talk of using robots to fix it, but apparently the
administration has other plans, and its budget is slated for serious
slashing, according to the Congressional Quarterly.

And "airline security fees"—which presumably we're
supposed to regard as "not-taxes"— are to go up by
$5-$8 per ticket under the President's budget. Shall we be the first
to say the President will be lying about taxes if he says they won't
go up on his watch? Ok.

Tom Coyne, the proprietor of www.ripolicyanalysis.org, had a column
in yesterday's journal. The gist of it was that RI is generous, but
we get little for it. Over here, he'll get agreement that, compared
to other states, RI is generous towards the poor. But his analysis is
a bit funny.

Tom Coyne: R.I.: Lots for poor, to little effect

THE STATE of Rhode Island spends much of its general-revenue budget
on helping the needy -- more, in fact, than the federal government
mandates.

For fiscal 2006, the governor's proposed budget for human services
is $1.2 billion. This covers spending by the departments of Children,
Youth and Families; Elderly Affairs; Health; Human Services; and
Mental Health, Retardation and Hospitals. An analysis by the
Barrington School Department estimated that in fiscal 2003, Rhode
Island school systems spent an additional $362 million on special
education. We thus appear to be spending roughly $1.6 billion a year
to help Rhode Island's neediest.

Special education is not aid to the poor. There is a correlation
between special ed and poverty: poor communities have lots of special
ed students. But there are plenty of special ed children whose
parents are not poor. I count a few among my neighbors here in a
perfectly "nice" neighborhood.

The rest of the column is equally confusing. For example, he
complains that our high welfare spending goes with a high level of
teen pregnancy. Our response is just confusion. Perhaps he maintains
that generous welfare benefits cause teen pregnancy. Some have. The
ones who do typically subscribe to the economists' view of human
motivation. Very roughly, they see free benefits as an incentive to
pregnancy. But this view of human nature is pretty bizarre, and most
economists only use it because there isn't anything systematic to
replace it yet. Ask yourself how many of the things you've done in
the past (especially in matters of sex) were done because of the
cost-benefit calculations you made.

Logically, this raises two questions: How much is Rhode
Island spending in comparison with other states, and how effective is
this spending?

It's fine to ask these questions, but the fact is (or should I say
"logically") that people disagree about how to measure the
effectiveness of welfare spending. Over here, we believe (all of us)
that the effectiveness of a welfare program should be measured by the
quality of life of the people it is meant to help. Less poverty
equals more effective.

Mr. Coyne claims, as do many others,
that the measure of a successful program is the number of people who
are no longer on the welfare rolls. But this is a warped definition
of success. It's fine to be guardedly pleased when the demand for
welfare goes down, but to use the decline in rolls as the important
measure of the program's success is to overlook the many other reasons
that the rolls might decline.

What a lot of policy analysts don't realize is that for almost
everyone on it, going on welfare is a choice: you can always eat dog
food. The point of welfare is to preserve some dignity and quality of
life even for the people who have no money, and to help those people
through a difficult time in their lives. That's what the program is
for. To the extent that people who need it can't use it, it is a
failure. It is conceivable that Rhode Island can't afford a
successful program. This is a testable proposition, and might be true
for all I know, but I'm not aware that it's really been tested. But
measuring the success of the program by the number of people it
doesn't serve is a strange choice.

There are a million Rhode Islanders, leading a million different
lives via a million different paths. Many of those paths take people
down into unpleasant circumstances, some for bad reasons, others not.
Unfortunately, the people who craft our social policy tend toward
limited imaginations, so our welfare policies tend to have only a few
solutions. Too bad one size doesn't always fit all.

Sat, 29 Jan 2005

It appears RIPR is not
alone in our
distaste for
the Attorney-General-designate and his contribution to making torture an
official policy of the US government. Click on the first
link to see all the blogs who agree. So call your Senator, again.

Fri, 28 Jan 2005

We're going to save most of our budget analysis for the print
newsletter, but this couldn't pass without comment. The Governor's
FY06 budget proposes to save $2.1 million with welfare rules changes,
such as halving the time FIP recipients have to find work, and making
work plans a requirement to receive the first check.

It's one thing to promote welfare rules change because you think
this is a better way to run such a program. We can debate that, and
debate the purpose of the program and how best to run it and so on.
It's an entirely different thing to tighten rules because you need to
balance the budget. There are two reasons for this:

It makes it abundantly clear who loses when the budget gets
tight. That Carcieri refuses to ask for another dime from his
economic peers is appalling when he takes it out on the people so poor
they have to be on welfare.

The rules he's talking about are there to change people's
behavior. Either they change, in which case the dollar figure
estimates are no good, or they don't, in which case, the rules are
simply punitive, and no good comes of them.

Saving $2.1 million in this fashion is taking real money from people
who badly need it. Is that the best we can do?

The FY2006
budget is out, as of yesterday. The Governor deserves some praise
for addressing at least one of the important problems facing towns:
rising pension costs. On the other hand, the way he chose to address
it isn't so terribly wonderful, but it's better than neglect he offers
to the rest of their woes. It's not too harsh to complain that the
biggest problems the state and the towns face are the rising cost of
health insurance and the distribution of the tax burden for all our
public services. Not everyone agrees with RIPR about the second one,
but you can confirm the first by asking any town administrator what's
their biggest budget problem. On these counts, there seems to be
virtually no word from the Governor. (But it's a big budget and our
analysts are still reading. Maybe he'll surprise us on page 423.)

Our prediction, which is sort of like predicting some more cold
weather before spring: if this budget passes, expect big property tax
increases. So far, the Governor seems to think all he need do is give
the towns less money and command them to lower their expenses. The
previous two Governors thought so, too, and it didn't work. What
makes Carcieri think they'll listen to him? Does it cross his mind
that they might love to do what he's asking, but can't? Can he really
think all 39 towns are run by incompetents or con artists?

Editorial note: Our management should have been following this more
carefully, but wasn't. The budget date has advanced from previous
years, when it was introduced in February. We're rearranging the
articles planned, so the next issue will be the budget issue. Why not
subscribe now?

Thu, 27 Jan 2005

Bush wants to extend to all federal agencies personnel rules similar to
those recently developed for Homeland Security and Defense, OMB announced
yesterday. Those rules give the government greater flexibility, which
Deputy Director for Management Clay Johnson III told reporters improves
employee management and helps attract skilled workers.

But federal employee unions have called such rules an affront to employee
rights. National Treasury Employees Union (NTEU) President Colleen M.
Kelley said OMB's proposal to go government-wide was "appalling"
considering the new DHS and DOD rules have yet to be implemented. In fact,
DHS announced its final rules yesterday, and the NTEU promptly announced
it would sue to block them.

You can find a brief of the issues here.
In a nutshell, the Homeland Security employees have been given the appearance of
collective bargaining rights (per the bill establishing the department), but
little of the reality. HS employees are to be subject to firings at will, without
hearings of evidence against them, a pay system separate from the GS system used by
everyone else, the denial of a union representative at administrative proceedings
where an employee's job might be at risk. Location and assignments of work and
subcontracting are specifically exempted from collective bargaining, and the director
retains the right to override pretty much all of it with agency-wide directives.

Wed, 26 Jan 2005

Over the past several years, I've spent a lot of time on the phone to
government agencies around the country, and it's interesting how
consistent my experiences have been with certain states. When I call
governments in the South, I inevitably wind up talking to a woman who
won't let me hang up until she's sure I've got the information I need.
When I ask, publications come flying my way in the mail, usually for
free. When I call the Pacific Northwest states, I almost always wind
up talking to a guy who's been involved in some innovative planning
project or recycling program, and who makes me feel like I'm from some
distant and backward planet. Then he sends me some fabulous report
filled with all the information I needed.

But when I call people in Rhode Island, to ask for public
information, the inevitable response is first, "Who are
you?" Once they're satisfied that I've properly identified
myself, they say "You'll have to check with the public
relations department." (Or legal counsel, depending on the
department.) About half the time, that department makes me put the
request in writing. This is simply a matter of course: the way that
routine questions about public records are handled. The questions
involved have been about such high-security information as the state
unemployment rate, traffic accident statistics and pollution data.

Some departments are better than others, and are less likely to
seem so tight with public information. Labor and Transportation are
bad, Human Services is good. Education is good, Economic Development
horrible. But the variations are around the same theme: the
information is ours, and we want to control where it goes. This is
simply the way it works here.

People around here have come to expect this, and suppose it to be
the way government works everywhere. But I'd like to report from my
own experience, that ours is the only state where this kind
of thing happens at all, and it happens routinely here. Open
government laws are one thing, but changing the culture of the state
government would help much more.

Governor Carcieri today proposed a pension reform plan which will help
avert a crisis if it is enacted this year. It will save Rhode Island
taxpayers a total of $256 million over the next five years and, in the
next fiscal year alone, it will save the state and local communities $44
million.

You can often find harsh words here for the Governor. So the room
filled with pleasant surprise as the staff learned that the plan proposed
is not substituting a defined-contribution pension system for the
state's current defined-benefit pension plan for state employees.
(There is no word about whether this is what the Governor really wants,
or if this is what he thinks he can get, but mind-reading is poor
practice, and what is actually done is what's really important.)

The four prongs of the Governor's plan struck us as harsh, but
honest, unlike a lot of snake-oil pension reform. There's plenty to
criticize. There will be an article about the state pension system in
the next issue (why not subscribe now?), and I
expect there will be plenty to criticize. I suppose it's a sign of
the times when proposals as harsh as these seem like cause for relief,
but these are the times in which we live.

Tue, 25 Jan 2005

This publication tries to be specifically about policy, rather than
politics. We're most interested in what government does
rather than the usual inane speculations about how this or that
"will play." Further, most of my expertise is about matters
of domestic affairs, and my inclination is not to go where I don't
have experience. Property taxes, land use, clean water, food safety
are the stock in trade around here, not religious strife, throw
weights, supply chains and body armor.

But it doesn't seem like much of a stretch to say that I am
appalled that our country has, to all appearances, officially
sanctioned torture. I don't mean that we have spokesmen out there
claiming that torture is a good thing. There don't seem to be any of
those. But official spokesmen are just as often covering for official
policy as they are explaining it. Perhaps more so.

By now we do have an assembly of evidence
(here's some), including legal
opinions and memos, official reports about
torture and the prisons we've set up in Cuba, Afghanistan, Iraq and
who knows where else. Not to mention those pictures. What's in that
evidence shows that the US has effectively condoned torture and prisoner abuse,
operates secret prisons whose locations we don't know, with occupants
whose names we don't know charged with crimes we don't know.

The breadth of the evidence
makes it embarrassing that Specialist
Charles Graner has been prosecuted for atrocities and yet no one above
him seems likely to suffer even a subpoena, let alone an indictment.
We have a country where criminals aren't just walking free; they
aren't even regarded as criminals by the people we expect to enforce
the law. Which brings up the final point:
It is astonishing that anyone involved with the formulation of these
terrible policies could ascend to become the nation's chief law
enforcement officer. It's even more astonishing that any of our
nation's Senators wouldn't consider a vote on
Alberto Gonzales to be a
vote of conscience rather than strategy. Call yours now.

Update: Gonzales's response to the Foreign Affiars Committee indicates that his understanding is
"cruel, inhuman and degrading" interrogation tactics are legally justified both
by our constitution and by international law (e.g. Geneva conventions against torture).
(Link to story here.)

The ad at the right is a link to thereisnocrisis.com, an
organization devoted to refuting the conventional view that there is a
funding crisis in Social Security. We haven't done ads yet, but
there's a first time for everything. This one is unpaid, though we
hope others won't be. RIPR exists to provide a counter to the
conventional "wisdom" and so, it seems does
thereisnocrisis.com.

From the site:

America promises that those who work hard and play by the rules
deserve a secure retirement. For 70 years, Social Security has made
sure we kept that promise. Social Security is in a healthier financial
situation now than it has been for most of its history. Even the most
pessemistic of economists agree it will remain solvent for
decades. There is no crisis.

The current RIPR issue has an article
explaining how some can claim that Social Security will go broke in a
few years while the Social Security trustees think there won't be a
crisis for decades. Why not subscribe?

Let me reiterate that our appeal has nothing to do with child care
providers, or their right to unionize. I respect the important work
that they do, as well as their right to organize.
This case is about one thing: the Labor Board's breathtaking and
unprecedented decision to unilaterally create 1,300 new state workers.

According to organizers at SEIU 1199, legislation has been prepared
for introduction that will provide recognition of the state's day care
providers right to organize, though will not call them state
employees. Grace Diaz in the House and Juan Pichardo in the Senate
are planning to introduce it.

With the Governor presumably behind it, doubtless the legislation
will have no trouble passing.

Mon, 24 Jan 2005

Here's a
story
in the Financial Times about how Asian central banks are now central
to the US administration's fiscal policy. That is, the vast majority
of bonds we sell don't go to individual investors, they go to central
banks in other countries.

In 2003, the most recent year with full international statistics,
central banks financed 83 per cent of the US current account deficit,
with Asian central banks accounting for 86 per cent of flows.

A similar picture is emerging for 2004. Despite a good start to the
year, when the private sector was a large net purchaser of dollar
assets, central banks came to the rescue again. The People's Bank of
China has let it be known that China increased dollar reserves by
$207bn (€159bn) in 2004, financing nearly a third of the US current
account deficit, estimated at $650bn.

There's a saying that if you owe the bank $100,000, then the bank owns
you, but if you owe the bank $100 million, then you own the bank. The
Asian banks holding our bonds can't sell it all without tragic
consequences to their own economies, and one could justifiably suspect
that this is what keeps our own fiscal engineers from lying awake at
night. But the article goes on:

Self-interest has supported much of this flow of cash. The US has
lapped up cheap finance to fund its unquenchable appetite to
spend. Asian governments have until now been keen to oblige, in order
to keep their currencies from appreciating. But all investors have
their limits and they may start worrying about their degree of
exposure.

Once Asian central banks begin to question why they hold so much US
debt, who else will buy it? To be quite clear: you can only run a
deficit if someone is willing to loan you money. The article goes on
to note that the Bank of Thailand plans to lower its dollar holdings,
as do bankers in Russia and OPEC countries.

Which would be another fine reason not to
punt on
the debt to the Social Security trust fund, as appears to be the
assumption of the Bush administration. At the rate we're going,
pretty soon we'll have no market for US bonds, except for the
Social Security trust fund.

Wed, 19 Jan 2005

To do that, I am developing a five-year tax reduction plan. This plan will
be broad-based, benefiting as many Rhode Islanders as possible.

I will also propose that new lottery revenues be dedicated to direct
property tax relief.

Translation: we will see no property tax relief, though we might
see a modest increase in state aid to towns this year.

But we might see an income tax cut, which is what he means by
"broad-based." A 10% income tax cut will provide a family
who earns $50,000 a year a cut of around $125. A 7% property tax cut,
which would be about the same amount of money statewide, would
probably net that same family around $525: four times as much. A
property tax cut is harder to
do, since it requires changing the relationship between the states
and the towns in a fundamental way. But a property tax cut is worth
much more, and we continue to wonder why he doesn't care to take it
on.

Mon, 17 Jan 2005

However, a privatized system has another contingent public liability
that is often not discussed: the need to ensure minimum retirement
benefits. In Chile, which shifted over to fully funded individual
retirement accounts in 1981, the government has had to guarantee a
minimum pension to those workers whose lifetime savings in the new
system do not allow them to earn a minimum pension income. These
expenditures now come out of general government revenue. They are
already beginning to be significant and are expected to grow very
substantially in the future.

This is from Manuel Agosin, an economist with the Inter-American
Development Bank and the University of Chile.

What he's saying is that it's all fine to allow people to have
private accounts whose investment they control. But in such a system
there will unavoidably be winners and losers. Apparently the
political pressure to protect the losers was too great for the
government of Chile to realize the savings from allowing old people to
starve.

Needless to say, the proposals from the "Reform Social
Security" crowd don't account for that. Somehow they imagine
that the losers will disappear beyond the pale of right-thinking
people And presumably they will, in one sense, until a latter-day
Walker Evans shows up with a camera.

Fri, 14 Jan 2005

Barbara Anderson is the executive director of Citizens for Limited
Taxation, the group in Massachusetts responsible for Proposition
2½, the property-tax limit measure that, 25 years ago, became
one of the symbols of the anti-tax "revolution". She has
written a fascinating
editorial
about the conditions in Massachusetts today. Her conclusion: Prop
2½ didn't do what it was supposed to. Property taxes are still
high, and still rising. Worse, as she points out, the tax on a
property bears no relation to the ability of the owner to pay.

She identifies the usual culprits: spendthrift town officials,
powerful municipal unions, and unthinking neighbors, who vote to raise
their own taxes.

It's a puzzle all right. But what's really a puzzle is why she
refuses to consider what seems over here to be an important point. If
we think of Prop 2½ as a 25-year experiment in simple-minded
tax caps, isn't the evidence fairly compelling that the experiment was
a failure? Maybe tax caps simply cannot do the job? What if tax caps
are not the best way to control taxes?

Most anti-tax crusaders start from the premise that spendthrift
town officials and powerful municipal unions are the problem. But you
don't learn anything from someone's premises. That's where the
investigation starts. You learn from the conclusions derived
from premises, whether the derivation is logical or empirical, and by
comparing those conclusions to your observations. If science worked
the way most anti-tax crusaders work, we'd still be plowing fields
with sticks.

Two stories were right next to each other in this morning's paper. In
one,
it was reported that Blue Cross will pay $17.5 million to Rhode
Islanders for not passing along to customers the steep discounts it
was getting from drugstores and drug companies. This was a
settlement, not a judgement, so Blue Cross, typically, said this:

Fraser said that in reaching settlement, "in no way does Blue Cross
admit to any wrongdoing or any violation of any law or contract
provision."

But my favorite quote was this one:

Also, Fraser said the health insurer will not have to dip into
reserves or raise rates or premiums to pay for the settlement. "Since
the case has been ongoing since 1996, we have anticipated it would end
at some point, so we have been setting aside money in case of a
settlement or a lost judgment," he said.

In other words, Blue Cross is paying this settlement with money
extracted from premiums. To put it plainly, the penalty they're
paying for setting premiums too high is being paid with premiums that
were set too high. While it's great to see wrongs righted, it's not
100% clear over here at RIPR HQ how this settlement constitutes
progress towards keeping health care affordable. The people
responsible for these bad decisions aren't paying this settlement, we
are.

Insurance accounting is a hall of mirrors, with special rules and
definitions that often seem to make little sense. From the point of
view of an insurance regulator looking after for-profit insurers
trying to make a buck off their customers, the rules have a certain
amount of logic to them. They are for ensuring that insurers don't go
bust, leaving their customers high and dry. But for the problem of
running a public-trust insurer, like the non-profit BC/BS, the rules
are dumb, and force the insurer to do things against the public
interest. There's plenty more about this in last
February's issue, which looked at the Blue Cross annual report.

The other story
was about the new appointment of Chris Koller, the widely respected former head of
Neighborhood Health Plan (the RIte
Care health plan), as the state's new Health Insurance Commissioner.
His job will be to oversee the state's health insurers. He will have
his hands full. But the prediction around here is that he won't be
able to do what we hope, unless the structure of the market —
including the rules that regulate that market — is changed.

Thu, 13 Jan 2005

A friend has put out a video
about the principles that motivated the American revolution. He
decided to test them by attending a re-enactment of the Boston Tea
Party, and, well here's part of the pamphlet he printed for the
occasion:

Tyranny and Despotism sound like old words describing old phenomena.
Nope. there's plenty to go around today. The Boston Tea Party
triggered a revolution that started a whole new country. But
something's gone wrong because now multinational corporations have
really gained the upper hand — just like the East India Company
did back in 1773. Mr. Adams, in breeches and waistcoat, is a
Reenactivist determined to add his voice to the rabble.

What would you throw in Boston Harbor today?

The video is cool for
attempting to point out that many of the principles on which this
country was founded are mostly honored in the breach today.

We hear plenty about the right to bear arms, and the right to free
speech. But what about the enlightenment principle that truth is to
be sought through honest investigation of evidence? Does our President
adhere to that? What about the unjust oppression of the minority,
whose dangers were so carefully outlined in the
Federalist papers? Do our
leaders in Congress adhere to that? How about the value of democracy,
where every vote
(or here)
is counted? Not to mention — as the video points out —
the right to self-determination, now given away to distant
bureaucrats and
multinational corporations. Could the founders' struggles on behalf
of this principle have been any clearer? Too bad they didn't think
to write it into the Constitution. They probably thought it was
obvious or something.

We don't hear that much about these principles, lately. Which is
another way of saying that Jefferson was at least partly
right:
if you make a list of rights, people will think that's all there are.

The video is also cool because you don't see many videos filmed
secretly from a mini-camera hidden in the front of a tri-corner hat.

Tue, 11 Jan 2005

Thanks to the soaring sales of its hip iPods, Apple and Steve Jobs are set
to make a bundle of cash in 2005. Amidst all the celebration and excitement
about the iPods, Jobs isn't revealing his dirty little secret about them.
The sleek music players contain poisonous lead and other highly toxic
materials that can cause damage to our brains and reproductive and nervous
systems. Once the little music machines become obsolete, they are dumped
into landfills or shipped overseas as electronic scrap. Their toxins leach
into our air, land, and water and send poisons into our communities.
Especially vulnerable are the children in developing countries who pick
through the wastes to find parts to sell.

Steve Jobs should do more than celebrate his profits. He should live up to
his good reputation and take responsibility for Apple's iWaste. He should
harness the company's resources to produce toxic-free iPods and to recycle
the millions of obsolete Apple computers that can poison our communities
with over 36 million pounds of lead. Up to now, Jobs has chosen another
course. His company has no effective program to recycle discarded computers
or iPods nor has it eliminated many toxins in its products. It opposes
legislation to recycle electronic waste and produce cleaner machines.
Batteries for iPods that fizzle out after a year or two and which are
difficult and expensive to replace are Apple's most recent addition to the
growing toxic iWaste mass. It's time for Jobs to take another approach.

Clean Water
Action/RI
introduced a
bill last
year whose intent was to get manufacturers of computer equipment to
take responsibility for its disposal. The bill didn't go anywhere
interesting, but it will be introduced again in the coming weeks of
the new session.

One of the features of the President's plan* for Social Security is the
idea that the benefits should rise over time with the consumer price
inflation rather than wage inflation, which is usually somewhat
faster.

There are two important aspects to that proposal. One is the
obvious: it's a pretty stiff benefit cut, and it cuts people who are
young now much harder than older ones. The other is that this cut
alone would solve the Social Security "crisis," according to
the Center on Budget
and Policy Priorities. This leaves one to wonder what is the
point of pushing the private accounts business. It couldn't be
just the vast fees that will go to Wall Street brokers, could
it?

One also wonders why the option of raising the ceiling on SS taxes
(currently you don't pay any SS tax on income over $90,000) isn't a
part of the mix. But then one heaves a deep sigh and remembers that
our nation seems to be allergic to sensible discussions that involve
taxes.

*Not that he has actually presented a plan, but
there seems to be a vague consensus from conservative editorialists
and thinktankers of such a plan's details, so criticism must be
directed at that.

Mon, 10 Jan 2005

I've been browsing through the Comprehensive Plan for New Shoreham,
otherwise known as Block Island. The housing section is telling:

To a far greater extent than elsewhere [in Rhode Island], non-resident
demand for summer homes results in housing prices on Block Island
inflated to levels difficult for year-round residents to afford.
Recent estimates indicate that the annual income needed to purchase
the average priced home on Block Island was $150,000, but the Block
Island median household income was only $50,000... This reflects the
special problem of a dual housing market, with wealthy visitors from
elsewhere bidding values up high relative to year-round residents'
ability to pay

What's interesting is that this is going on all over the state.
Little Compton is not far behind Block Island, and most of South
County is rapidly becoming unaffordable, too. Nor is it just beaches:
there are plenty of places in Rhode Island that are no longer
affordable to people who grew up there.

Its isolation and small size (not to mention its beauty) make the
housing crunch on Block Island more spectacular than in the rest of
the state, but the same pressures that created it are working on the
rest of us mainlanders, too. In Cumberland, Lincoln, Pawtucket and on
Providence's East Side, you see commuters to Boston fleeing that
expensive market to find what, to them, are bargains. In South County
you have New Yorkers buying houses in residential neighborhoods for
vacation homes. Everywhere you look, people from away, and rich
locals are bidding up property beyond the reach of the very people who
make those communities good places.

And it's not as if the less-desirable parts of the state avoid the
crunch. That's where the refugees from the high-priced spots move to.

We are in the middle of a housing crisis, as has been documented here (click on "Cities, Towns and
Urban Policy"), here or
even here.
To people who have housing, the crisis is perhaps hard to detect.
They feel it in their property tax bill, thanks to an out-of-control
revaluation system (see issue 2 or
issue 4). But if you rent, the crisis
is hard at hand.

As has been said here
before, if
you go by what our state does instead of what our state
leaders say, we emphatically do not trust the free
market. That is, we don't trust it for taxicabs, tow trucks,
architects, electricians, and haircuts. We regulate all those
markets, either by controlling prices, or by limiting entry to the
field. But why not housing and land? I'm certain there's some clever
rhetorical way to tie
in the roof over our heads and the haircuts on them, but I'm not poet
enough to do it. But skip that and just ask yourself the question:
why do we regulate the
less important things, and leave the really important ones to market
forces. Market forces that have been demonstrated time and again to
have absolutely nothing to do with the
health of the
places we live.

The year-round community of Block Island is strangling, with
long-term residents emigrating to cheaper places, teachers and police
finding it difficult to find housing, and no room for the town's
children. We can learn from their example, or we can just wait for it
to happen here on the mainland.

Fri, 07 Jan 2005

Today Governor Carcieri told the Chamber of Commerce Coalition, that great
strides have been made in job creation and economic development in the
past year. He cited the G-Tech relocation in Providence , the decision by
Brooks Pharmacy to locate their headquarters in East Greenwich , job
creation by both Bank of America and Citizens Bank and the Senesco boat
yard at Quonset Point.

Hooray!

Then he addressed the challenges facing Rhode
Island today.

At last, we can get to the real challenges! Presumably these would
include skyrocketing property taxes and health insurance costs for
Rhode Island's citizens and the state's public schools. Or the
housing crisis? How about the land development pressures on
Narragansett Bay? Our disappearing open space? Mercury poisoning of
our children? Lead paint pollution in our cities? The increased
demand at food kitchens?

"Now we have to build upon the momentum we've gained," Carcieri said.
"One way to do that is to make our state more competitive. As you know,
I would like to develop a plan to reduce the income tax and bring it in
line with Massachusetts. I have asked the Economic Policy Council and the
Rhode Island Public Expenditure Council to study this issue and create a
plan to reduce broad-based taxes."

But no, it's our income tax.

No one would mistake Rhode Island for a tax haven, but the idea that
we are a high-tax state is only partly true. There are places in 27 other
states where the sales tax is higher, and our income tax is among the
lowest in the nation on middle and low-income people. If you don't
count property taxes, we are down around number 44 in tax burden on
people with median income and below. (You might enjoy issue 4 on the subject.) For higher income
people, the rank is substantially higher, since our income tax is
progressive.

But the point is that this is only if you ignore property taxes.
If you include them, the picture is very different. It's still not as
dire for most of the state as the Governor would like you to believe,
but it's not pretty.

So here's the problem: the Governor's plan will only make things
worse. Without fundamentally altering the relationship between the
state and the towns, the Governor will only make worse what has been
happening for the past 20 years. He will cut the towns' education
money, while at the same time making a big stink about whatever
schools are deemed "underperforming," he will cut the PILOT
payments while at the same time demanding that towns increase their
fire safety inspections; and he will cut the other local aid while at
the same time demanding that towns beef up their first response
systems and increase the number of DUI traffic stops.

To the towns, the Governor talks out of both sides of his mouth.
He says they should cut their budgets, but he says they've got to do
more at the same time. Our Governor has a lot of management
experience, but he's never been on a town council, and tried to do
what he tells them to do. Until he decides it's time to fix the
broken relationship between the towns and the state, his attempts to
lower Rhode Island's overall tax burden are doomed to failure. Towns
will be forced to hike taxes, even the ones ruled by anti-tax
councils, as mine currently is.

Curiously, Governor Carcieri's approach to cutting property taxes is
very similar to Governor Almond's before him. And Governor Sundlun's
before him. It didn't work for either of them, and it's not going to
work for him.

The fact is that most Rhode Islanders pay many times more property
tax than income tax. Two-thirds of the state pays twice as much
property tax as income tax. Only at the very top of the income
distribution is the situation reversed. An income tax cut will favor
the very rich. A property tax cut favors many more people. Figuring
out how to do it won't be simple; it will be solving the Gordian
knot. But that's been done before, and the guy who did it found it
well worth the effort.

Thu, 06 Jan 2005

The Governor is making waves by naming people to seats on the Coastal
Resources Management Commission (CRMC). These seats are the ones currently
filled by legislators or legislative appointees, whose status has
presumably changed due to the separation of powers amendment passed in
November.

Said the Governor, "Everybody wants to see these boards
continue to operate." Well, not everybody. There are those of us
who think it odd that Rhode Island has two independent environmental
agencies, and wonder why we can't take the opportunity to change that
situation. Between DEM and CRMC, there's overlap in authority and in
function. It's not clear if there would be much of a fiscal impact to
changing CRMC into a Coastal division of DEM, but there would probably
be some, and it would make policy on some issues, like coastal land
management and septic systems, clearer.

CRMC was invented to be a creature of the legislature, to make
policy opposed to the Governor's DEM. If DEM had been doing what the
legislature wanted it to, they wouldn't have created it. I'm not
saying that's necessarily a bad thing, but that's what it was. (I
suspect a detailed history of CRMC might show it was a bad thing, but
that's just my suspicion, and it's not the point.) CRMC provides some
useful functions: they are a forum for policy and that's a good thing.
But there are other aspects of Rhode Island's environmental management
that deserve a forum, too.

Rhode Island still has a state planning council, whose job it
should be (and once was) to provide just such a forum, for coastal
issues, and other environmental issues, as well as roads and social
services. Many of the important policy issues facing the state are
connected (if only because all the money comes from the same pot) and
it does us no good service to keep them separate.

Wed, 05 Jan 2005

Froma Harrop has a nice
piece in
today's Projo about eminent domain. She writes about the abuse of the
power of eminent domain to serve the public interest with
"economic development" projects. Like Wal-Marts. But she
does it as if things like that never happen around here.

In 1997, the DeCotis family was evicted from their land in
Smithfield to make way for the landscaping for the Fidelity building
to be built there. The building was already completed before they
were successfully evicted. In other words, the power of eminent
domain was used on behalf of Fidelity's shrubbery.

Let's not forget all the businesses and homes obliterated by the
highway to Quonset Point, either. Seventeen homes and half a dozen
businesses, including a big gravel works, were deemed less important
than a highway built parallel to an existing road (that has no traffic
lights). Given that people travel around 50 on that road, and that it
is about 5 miles long, truck traffic will save approximately one
minute per trip. What's more, the road is being built to serve
businesses that do not yet exist, and may never exist.

There's more: what about the homes and businesses in the way of
the new Sakonnet River Bridge? These are doomed because it was
deemed not cost-effective to repair the existing bridge, due to years
of neglect. So the public purpose behind this exercise of eminent
domain was... what? To excuse neglect by DOT? To set a precedent
rewarding negligence? To keep bridge designers at DOT employed?

Tue, 04 Jan 2005

But it happens on the editorial page of the New York Times.
Editorialists are the only journalists allowed to express their
opinion. Everyone else apparently has instructions simply to reprint
what they're told.
Read it here.

An article
in the May/June issue of Health Affairs looked at the
long-term cost effects of managed care. Remember managed care? Was
supposed to hold costs down. But oddly enough, lots and lots of us
are in managed care now and what do you know? We still have a
health-care crisis.

In the United States the impact on health spending of managed care and
managed competition had been controversial from the start. Skeptics
argued that these tools might yield a one-time savings, spread over a
few years, but that by themselves they would be unlikely to slow the
long-term growth in health spending thereafter. It now appears that
these analysts were right. In retrospect, and taking a longer-run
view, the cost control of the early and mid-1990s merely represents an
abnormal period in the history of U.S. health care.

The article looks at health care costs here in relation to where they
are in the rest of the industrial world. The results are pretty much
what you'd expect: we pay more, get less than most everyone else. But
we have a solution. For example, our trade representatives have been
leaning on Australia to "water down its system for negotiating
the prices it pays for prescription drugs." (According to the
International Herald Tribune.)

There article has an interesting table
(here)
that tells you what you already knew: our costs are half again as high
as the nearest industrial competitor, Switzerland.

The article goes on to make the point that the fragmented nature of
the US health care market is partially at fault for the prices. They
point out that health care buyers in the US are not organized, and
therefore cannot exert pressure on the sellers. The market power here
is all in the hands of the sellers.

In a way, this agrees with the prescription that says that health
care costs will not be controlled without action on the demand side.
This is probably true. But is it more appropriate to try to condition
health care consumers with co-pays and co-premiums, or might it work
better to give the buyers market power by ending our
employer-sponsored system and going with a single payer system?
Free-market theorists will tell us that lowering demand should lower
the prices, but in the context of a doctor's office here in
America—all fixed costs like salaries and, um, health care
premiums—it's hard to see the mechanism that will push down the
prices. Which is to say that encouraging people to go to the doctor
less often won't make those prices go down, except in free-market
fairy land.